philosophy quickly. “You cannot bank on having innovation fix deficiencies in cost competitiveness. Even the most
technically ‘aloof’ industries are now under cost pressure,”
Spalcke points out. A failure to lead on cost can be fatal, and
businesses must try to lead on innovation and lead on cost
at the same time, he believes. “If you happen to hit both
sweet [spots],” he adds, “you make a ton of money.”
THE HUMAN SIDE OF TRANSFORMATION
The DfX process was only one part of the shift Spalcke
wanted to bring to Philips. The other major task entailed
reorganizing the procurement department along standardized processes, with crystal-clear roles and responsibilities.
The department would need to become the neutral arbiter
of how design, procurement, and manufacturing decisions
were made, and in running the DfX process, it would also
need to take on a strategic role in planning the company’s
products. That meant doing two things. First,
it meant reorganizing procurement and redefining the roles of procurement engineers.
Second, it meant putting the right people
into those roles, and making sure they had
the skills to carry them out. Ad Boon, the
company’s human resources officer for procurement, decided to do both at the same
time. Boon had been at Philips in the early
2000s before moving to NXP, formerly the
company’s semiconductor division, when it
was spun off, and then working as a private consultant. He
came back to Philips in November of 2012 to join Spalcke’s
campaign.
When Boon examined Philips’ procurement function, he
found no less than 261 different descriptions of roles and
responsibilities. His first move was to lay out the 25 standardized job profiles procurement engineers, commodity
managers, governance roles, and others would need to fill
in order to implement the new organizational structure,
instead of the 261 then in place. These were matched with
a set of core leadership, functional, and technical capacities
the procurement engineers would need to possess, in different combinations, for a given role. “We did an enormous
exercise to translate what is needed in terms of the right
competency profile, [and] what’s the leadership capability
these people need to have,” Boon says.
Not all of the engineers possessed all of the capabilities
the new structure would require, however. Rationalizing
the confusing tangle of job descriptions allowed Boon to
make sure the people in those positions had the necessary
capabilities, and to begin putting the right people in the
right jobs.
Over 2,000 procurement staff members had to be individually assessed for the skills they would need in moving to
a management level. One example was dealing with ambiguity. “We don’t want people to shy away from uncertainty; we want them to welcome the uncertainty and turn an
uncertain environment into a certain one,” Boon explains.
“But we also don’t want them to overuse their capacity to
cope with ambiguity so much that they stop using data
and just go on gut feeling, or become reckless.” Many procurement professionals required extensive training as they
moved into their new roles. “In many cases, they needed
to take a step up in terms of their executive presence, in
terms of their decision-making timing, in terms of their
savviness,” he says.
One major group affected by the change in responsibilities was the procurement engineers, on-site procurement
staff in various roles who often were attached to small functional organizations and had little responsibility beyond chasing parts, managing suppliers, and trying to negotiate lower prices. In
their redefined positions, they would play a
strategic role on the leadership team of their
business units and would sit at a level equal
to that of research and development or of
manufacturing.
Another group, the commodity managers,
who were responsible for sourcing, also experienced significant organizational change.
They would now become a separate function from the
procurement engineers. Moreover, in the old system, commodity managers were located at the business group they
worked for. Under the new system, commodity managers
would be sited at the point of origin for the commodity
they sourced. They also would perform sourcing for that
commodity across all of the company’s different organizational units, rather than for separate business groups. This
meant that some commodity managers had to relocate
and that some groups were merged. Commodities groups
would now also report directly to Spalcke, the CPO, who
has a direct line to CEO van Houten. Spalcke calls this
“verticalizing and virtualizing” the company’s commodities
management.
This was no easy task, but the company moved quickly
to put everything and everyone in place. “Basically, we took
2,000 people, we put them in a new structure, and we moved
them from the tactical to the strategic level,” Boon says.
“The thing is, we did it in 18 months. That’s really fast.”
At the same time, Boon was hiring a 12-person executive
leadership team in procurement, to become Spalcke’s allies
in pushing his transformation. Boon partnered with Russell
